tv Charlie Rose PBS November 11, 2009 12:35pm-1:35pm EST
>> rose: welcome to the broadcast. with unemployment numbers reaching new highs, we talk to the distinguished harvard economics professor ken rogoff. >> it's not we're going to run out of money. we're rich. i mean, we can afford to pay our debts. we can afford to pay twice as much. the question is do we have the will? and will people on the outside-- chinese and others who invest in us believe that we have the will to pay our debts? because you run into problems way before you think you should. you don't hit the limits that you think would be possible. you run into problems where you
just can't refinance your debt. i'll pay, i'll pay, but the creditors don't believe you. >> rose: and we look at the middle east with akiva eldar of "ha'aretz." >> eventually what will happen is that the president will say "well can't want peace more than you." and i'm sure you've heard it so many times from american leaders and he has enough on his mind. he's got afghanistan, he's got iraq and let alone domestic issues. i'm afraid we're going to miss this opportunity. >> rose: rogoff and eldar when we continue.
captioning sponsored by rose communications from our studios in new york city, this is charlie rose. >> rose: ken rogoff is here, he is 2 t thomas d. cabot professor of public policy and economics at harvard university. from 2001 to 2003 he was the chief economist at the international monetary fund. in a previous life, he was an international grand master of chess. he has co-authored a book about the economic crisis called "this time is different: eight centuries of financial folly." i am pleased to have him here at this table for the first time. welcome. >> thank you. >> what you did in this book is what? >> we tried to put together benchmarks from history of what
the runup to financial crises look like and what happens after financial crises and look at how universal they are. but at its heart it's a book about arrogance and ignorance. people thinking "this time it's different, we're not going to have a crisis" for one reason or another. and if you're running up debt, a problem usually strikes. >> rose: or it will never happen again. >> the idea that it will never happen again. we've had five straight years where it's been good and there hasn't been a crisis. again and again and again. it's just amazing how countries experience crises repeatedly in complete ignorance of the ones that have happened in the past. >> rose: what did you have to do to get this kind of data? >> well, it's a long story, but you really couldn't have done it before the internet where we were able to find rare books, contact scholars who'd worked in india and venezuela. get help from a lot of people. i mean, it really comes from diverse sources. in the old days, we would have had to fly around to libraries
of the world. and we were able to do a lot of our traveling on the internet. >> rose: and you were able to go back how many years? >> we go back really to the 1300s when england defaulted to italy which was the first international financial crisis. >> rose: are you suggesting america could default? >> well, i think we might inflate. that's how it's done when you're a rich modern economy. we'd really is to back ourselves into a corner to default. we did it once before in 1933 when franklin roosevelt said "you know how gold was $20 an ounce? now it's $35 an ounce." if you were living somewhere else, that sure felt like a default. >> rose: there are people writing that we may run out of money, so to speak. >> it's not that we're going to run out of money. we're rich. we can afford to pay our debts. we can afford to pay twice as much. the question is do we have the will? and will people on the outside-- chinese and others who invest in us-- believe we have the will to pay our debts? because you run into problems way before you think you should.
you don't hit the limits that you think would be possible. you run into problems where you just can't refinance your debt. and you say "i'll pay, i'll pay. but the creditors don't believe you. >> rose: so the bottom line, america has too much debt? >> our trajectory of debt is a big problem. there's a risk that the financial crisis will morph into a government debt crisis some time down the road. in fact, carmen reinhart and i find.... >> rose: she's your co-author. >> my co-author carmen reinhart, who's wonderful. we find that when you have a lot of international banking crises like we've just experienced, often within a few years you have debt crises. not necessarily right away at the epicenter, but radiating out into the world. because, of course, governments are borrowing so much. >> rose: talk about the deficit in terms of how we got there, what we have to do, and what the reaction is in places like china where your colleague and good friend was just here.
>> nooil ferguson. >> rose: nall ferguson, yes. >> so it's just the trajectories. we started out with what was a modest death level and it has exploded, which is not unusual after a deep financial crisis. and it's not expected to be reigned in any time soon. it didn't just start with the nancial crisis. it started way earlier, certainly in the last eight years before president obama took office. we have social security problems coming on but the financial crisis turbo charged things with all the debt wes took on all the stimulus to fight the crisis. >> rose: and the problem is we lack the political will to do what? >> we lack the political whether to cut spending. the democrats want to tax 5% of the people to pay for everything, the republicans don't want to tax anyone. a lot of our expenditures are
not very flexible. they're things like defense, interest payments, old age entitlement payments and maybe 75% of it. we need to raise taxes significantly. and if the world looks at us and sees we're not willing to do it, they're going to charge higher interest rates. it hasn't hit yet, but that moment will come. >> rose: you say we're tending to do this and that moment will come. in the next five years? ten years? this s this moment of truth for the united states economic system going to come... >> well, things are hard to call but my sense is five to ten years. >> rose: we have five to ten years to do something about the deficit in america or... >> put-to-put us on a trajectory where.... >> rose: or we're argentina? >> we're not in good shape. when you lose your credibility, interest rates go up and you get in trouble and your options start getting worse because you're paying so much in interest payments. >> rose: why did you support
john mccain over barack obama? >> i knew him from before and i think he's a great american. i have to say i'm very impressed with president obama so i'm certainly very comfortable with the outcome of the election. >> rose: are you impressed with what hank paulson, tim geithner, ben bernanke and then larry summers have done in order to meet the crisis? >> you know.... >> rose: where do you part company with what they did? >> the biggest complaint siff the fact that we xwaled out the people who lent money to the financial institutions. when we bailed out the banks everyone who lent money got paid instead of having a bankruptcy of some sort. in a normal bankruptcy, if you lent money to a bankrupt firm, you don't get it all back. >> rose: right. and >> and we decided we just didn't want to handle the panic, we cast this net over the entire system. >> rose: was it knows do that? >> well, you know, i'll be honest, i don't want to go back and see it again and try it my way.
i mean... but if i were there and doing it again, i would have wanted to see a little more pain on the bondholders. i think we're going to pay big time now because we have to regulate the heck out of the financial system because everybody knows that they're going to get bailed out. president obama and his administration and the chairman of the fed said "we're not going to bail them out." but, i mean, who are we kidding? it's obvious that we will. we have to regulate. >> rose: too big to fail is alive and well? >> too big to fail is more alive than ever. so we need to regulate them a lot, and that's very hard. that's very problematic. we painted ourselves into a very tough corner. >> rose: that's wh t question now. what kind of regulation do you think we need? >> well, it's very simple in one level, which is the big problem is having too much short-term debt that has to get refinanced all the time. when you have a big wall of debt constantly coming due, if you're holding a mortgage or a subprime
borrower, if you're a consumer, you're the government, or if you're banks, you're very vulnerable to crises in confidence. that's what we find across history. and you want to constrain it. but right now they believe they can do that. and the people who lend to them believe they can do that without suffering any consequence. that's what needs to be reigned in. and a lot of these other things are really indirect. but in brief, i favor much stricter capital requirements on short-term borrowing in order to.... >> rose: well, give me an appropriate level. >> a level... you know, certainly going back to the kind of reserve environments that we had 20 and 30 years ago where it would at least be 5% or 6% on short-term borrowing so it was less profitable. maybe something much higher, conceivably. >> rose: what does it get to during the worst of... >> well, i mean, we were looking at firm which is had borrowed 30 times what they're worth. >> rose: or 40 in some cases. >> a hundred by some measures. and, you know, you can look at
history and things can be rolling along... because as long as you can keep refinancing and borrowing that money, you're great. you're borrowing cheap, lending to whatever, and making money. >> rose: would you introduce glass seeing the? >> i think there is a case for separating out deposit-taking institutions from other investment banking opportunities. >> rose: mergers and acquisitions or tradings or anything else? >> basically for economy reasons not because you can't still get into trouble. but if grandma is giving noun citicorp or bank of america, it protects them even if they're doing a lot of other things. we want to politically scrip that away. they can still get into trouble but they won't be as protected. i think that's the argument. >> rose: tell me, you would have commercial banks do what and not do what? glass seeing the. those that have popular insurance? >> yeah, i basically favor having what we call some version of narrow banks where our deposits go into things like
treasury bills and things which are very, very sound instead of more speculative activities. and to separate that out in some way. it's not... this is really a political economy argument, because the rest of the economy can still get in trouble just like it does. >> rose: i understand. so you would be happy to have glass-steegle reintroduced? >> that's a little strong and doesn't fit the bill. but, yes, some way to take sgrand ma off the table and try to weaken the grip of the financial services industry a bit. >> rose: take me to how you think china will see the world in terms of taking american debt? >> well, they're holding a couple million dollar, they're accumulating debt at maybe another $300 billion a year. >> rose: that's about a billion dollars a day, isn't it? >> very good. so they're going to be doubling
their debt soon enough. they have to look and say "are these guys going to pay?" especially if they owe us.... >> rose: when is a decision point on that kind of thing. what would have to have-to-happen to the american economy for them to say "these guys are not going to pay. i'm not going this anymore"? >> well, we don't know, that is very hard to call. we can tell when it looks like it's not sustainable, hard to get the timing but, again, i'd say five years. we don't have 20 years of this. >> rose: five years in order to get it together. >> to put it to where it slows down. they're not going to cut and run. they're not going to take all their money and put it into gold. but they're going to slow the rate of accumulation. and we borrow so much, our thirst for debt is so great, officials say well, where else would the chinese go. but i think we should say "where else will we go?" >> rose: exactly. who else will give it to us and
at what rate. what's going to happen to the dollar? >> we hope we'll stabilize things. the dollar has been trending gently down for 40 years. and the chinese currency needs to go up against the dollar. >> rose: but they don't listen to that much, do they? >> eventually they're going to decide they want to reorient their economy and things have to go another way. this current administration is more conservative. the new generation is much more independent. they won't do things radically because they don't work that way. but if the markets see them gradually pulling back it's going to hit our interest rates across the board and force us to tighten our belts sooner. >> basically when you look back you said what you saw was arrogance and ignorance. basically not realizing it was happening all over again, financial folly. this time it's different. and the arrogance was we're difference and the ignorance was "we're not." >> well, and here the issue is
"we're the united states, we will never have a problem." but we can get into trouble and if i had one piece of advice, it's not that easy to turn this ship around quickly. but we can what we can do is be careful not to have really short-term borrowing. even though it's cheaper for the government to borrow at three months and six months than 30 years, we pay less but then we have to refinance it all the time. and if the world decides they don't like us as much, it's going to hit us a lot faster and harder. we need to be very careful not to paint ourselves into that corner which so so many countries do. >> rose: i hear you saying you think barack obama is doing the best he could and there's nothing you would suggest or recommend there that he's not doing. >> let's be clear. i would have liked to have seen the bondholders, the people who lent money... not grandma, but the people in the private sector, the bondholders, pension funds, chinese, i would have liked to see them lose a bit of their money. it would have been very healthy.
we'd have a lot less problems figuring out how to reregulate the system if we did that. we didn't. now they're caught between a rock and a hard place. >> rose: you also suggest that if lehman... we're all looking at lehman brothers and saying "there was the straw that broke the camel's back and that's what created the crisis in terms of alerting us to what could happen if things... if confidence was lost. and you have said in here that if it hadn't been lehman brothers it would have been another big bank would have gone under. >> absolutely. it's just nonsense that the whole thing with lehman brothers this was a financial system that we had every red light brinking in the runup to lehman brothers going back to chess, i liken it to a chess game where okay in theory you can defend the position, but it's so difficult you can't. that's where the fed and the treasury were. a very difficult situation. >> rose: you have said also that unemployment, all these terms that we use "lagging indicator" and whether there's a sustaining unemployment, there is something to that.
that this unemployment is going to be with us longer and will take us longer to create jobs than we imagined. >> i'm afraid so. i mean, when you have a deep financial crisis like this, unemployment is deeper, it lasts longer, my wife that from tasha said "unemployment is going to go to 13%." i said "it's not going to go that high." my book with carmen says 11%. in many ways she's been right. because the unemployment separate 10% but about 3% of our labor force has pulled out and are not looking for work. and if you combine it, we have natasha's 13%. >> rose: are you paying up? >> in many ways. >> rose: (laughs) good for you, natasha. so there's also this, the notion that there was this japanese experience that we all have to... some people say, look, we may be japan. because they thought... well, you explain what they did. >> well, the japanese decided not to have anyone lose money if
they could help it. they did everything to push the problem into the future. they didn't clean up their balance sheets. people compare japan to the swedes and nordics when they had a crisis. they quickly cleaned up the balance sheet, they did this good bank/bad bank stuff to get the junk off the books. reprivatize it had banks and booms, things were rolling. the japanese waited and in many ways we are looking more like the japanese. we're doing a lot of things better but we, too, didn't want anyone to lose money, we didn't want to restructure and that's a challenge we face. >> my impression is that we also... they stopped curative methods earlier than they should have. >> well, you know, it's easy to say with hindsight. maybe we will. i mean, they thought they were coming out of the crisis, then they were back in the crisis, it's very easy to look at it with hindsight. people say "we're better than the japanese, we won't be like the japanese."
they had some advantages. they were lending to the rest of the world. we are borrowing from the rest of the world and when you're facing these challenges, it's a lot easier to be a lender than a borrower. so i mean i don't think we will look as bad as japan. i don't think that's more than a 5% chance. but we might look like japan lite for a while. >> rose: this is niall ferguson on our show. >> who do you know of note, from whatever background, academia, government, wall street, believes as exactly as you say. >> let me name just one. >> rose: okay, name one. >> ken rogoff. >> rose: sure, he's coming on this program this week. >> he's published a book.... >> rose: well he comes from the same place. >> he comes from the same university but not the same place. he's a very distinguished economist who used to be at the international monetary fund. he and i think in very similar ways about this problem, to name but what. >> rose: here is what he thinks: that the u.s.... that our best days are over.
correct me if i'm wrong. that we are britain. we are the british empire. >> well, that has to be true. i mean, i would have said that before this financial crisis we had 75 years where the dollar was king and whatever the privileges associated with that. i think it's less now, 40 or 50 years, but i don't think it's four or five years. this hurt but we're not out for the count yet. >> rose: tell me more about what we should do. what kind of taxation do you recommend and what kind of expenditure... what kind of cutting of expenses do you recommend? cutting of spending. >> you know, many of my colleagues and i agree recommend having a national sales tax, a v.a.t. like they do in europe. >> rose: value added tax. >> i was incredibly impressed that nancy pelosi was talking about that of having a value added tax because whenever i mention it i say it's politically impossible. no one will talk about it.
but we probably need something like that to supplement higher income taxes also. i mean, cutting expenditures is not that easy, our expenditures as a share of our national income is not that high by international standards. i mean, sure there's fat in government, but it's hard to have it without it. i think a lot of the adjustment has to come on the tax side. also on old age entitlements. i mean, raising the age of social security. >> rose: great that's the great monster coming down the road. our entitlement responsibilities. >> absolutely. but, you know, some people say that's a hundred trillion, forget about the $10 trillion we owe, that's nothing, that's the big one. i big to differ. i mean, the money that we really owe, the hard money that we owe the chinese, that we owe our citizens, you've got to constantly refinance that. you're constantly adding to that. and certainly one thing i have learned from studying financial crises is the big problem with running up a debt is not just that you have this burden for your children and your
grandchildren. the big problem is that it hits you a lot sooner. the markets lose confidence and you get in tlubl. >> when those people argue-- some people argue-- that the united states is a special place there is a creativity, there is an entrepreneurship, there is a quality of imagination that's different and we will find our way out of this because we have a larger share of those qualities. >> we are an extraordinary country, make no doubt about it. and it's been an extraordinary period. we may find an extraordinarily clever way to deal with this giant debt problem, but that doesn't mean that it won't involve some kind of default or inflation or financial crisis. >> rose: so tell me, what do you want the president to do now? >> you know, i think the single-most important thing--
and it's very, very tough-- is to articulate a credible policy where our debt trajectory slows down. and they've tried to do that but it's based on very, very rosie picture of what happens to growth. >> rose: what's too rosey? >> our picture of growth. so if we grow, that solves all the problems. if we're booming, then the debts start shrinking relative to our income, everything's fine. but i think it's an easy temptation to make unrealistic estimates of just how rich we're going to be in the future. >> rose: tell me where their estimates are wrong. >> well, when you have a typical recession, a typical u.s. recession, you roar out of it, you grow at double normal and even more sometimes. this was not a typical recession. this was a financial crisis amplified recession and when you look at other countries in other places, i know we're different, but we're not, you grow much slower. because the financial system's impaired, it takes lots of times
to figure out your regulation, the debt problems that you inherited are always big. so i hope i'm wrong. i hope our technology and ingenuity are such that we grow faster than anyone would expect. but if our growth isn't fast it's going to be painful to deal with our debt problems. >> rose: so the president needs to talk to us in very serious and sober way? >> yeah, it is not easy because he faces a congress that doesn't necessarily want to listen to that. he faces an electorate that doesn't want to listen to it. i have to say when i've gone around the country during the financial crisis and i talk about this and people say "what are we going to do?" and i said "we'll probably is to raise taxes." then they say "but not much, right?" and i say "well, 30%, 40%, maybe." and they said "but not my taxes." >> rose: is it enough to raise taxes over the people who make more than $250,000 a year? >> i don't think it's going to be enough. >> rose: the tax on the rich
won't get you there? >> you have to start there just for political justification. for credibility, but i don't think it's going to nearly get you the whole way looking at empirical estimates of what that raises. it's probably not going to be enough. >> rose: you mentioned politics several times. can the president suggest raising taxes and be reelected, do you think? >> i don't know. i mean, it's very tough. bill clinton raised taxes and he suffered for it. i think president obama may be forced to do it sooner than he would like. but you know, as long as interest rates are really low and as long as the chinese are lending us money freely, there's not a lot of pressure. the trouble is your debt can build up and these problems can just strike out of the blue. we need to get out ahead of it. >> rose: we had very good economic news in the third quarter growth of 3.5%. is that sustainable? >> i don't believe it is. i think there were a lot of good things happening with inventories rebuilding and there are positive forces. but i think there's a lot of
negative things coming. we have commercial real estate has yet to play out. >> rose: getting worse, they say. >> getting worse. the consumers are going to back. we have negative savings rates but now housing prices are down. state and local governments are having to figure out how to deal with technological t financial crisis. and then we have all the stimulus, we have the federal reserve, we have the treasury, all this low interest rates, government stimulus. we've got to pull it back someday, that's not going to be fun. it's a risky, difficult situation. it had... i hope i'm wrong, i really do. but, i mean, the norm that carmen reinhart and i find coming from the financial crises is you grow slow for a while, it's a hard time, eventually things are better. >> rose: so i say to you professor rogoff, i understand, i get what you're saying, i just need one place, one model for where what you say worked:. >> you know, you've basically made our bed at this point.
the decisions have been made with dealing with the financial crisis. so we have to look at countries like canada, which reigned in excessive public spending, chile which did that despite a very challenging environment. it has been done, it is the exception, not the rule. >> they reigned in spending. >> oh, they raised taxes, they reigned in spending, they were very careful not to make their debt vulnerable. like that canadians hat had a lot of their debt in u.s. dollars, they can't print u.s. dollars. they switched it to canadian dollars. even when they were in a bind. and you see the same thing in some latin american countries which have tightened their belts. we have always gone around telling other countries to do that when they have a financial crisis. it's not that fun to do it ourselves. >> rose: interesting book. "this time is different: eight centuries of financial folly."
carmen reinhart and kenneth s. rogoff. naill ferguson said "this is the best empirical investigation, he went back and found all the data of financial crises ever published." thank you. >> thank you. >> rose: pleasure. >> rose: akiva eldar is here, he's a well known israeli journalist, chief political columnist in and writer for the daily newspaper "ha'aretz." he co-authored a book about the history of israeli settlements called "lords of the land." it's now in paperback. i'm pleased to have him back at this table. welcome, my friend. >> thank you, charlie. >> rose: settlements, let's just start there, what's going on? >> well, nothing much besides the fact that they keep building. i mean there are no news, which means that the settlers don't really get impressed by messages from the president of the united states that is demanding
complete freeze of settlements. they keep doing what they have been used to do since '67, which means that when i say there is no news, is that they keep building everywhere. >> these are not just enhancing settlements, these are new settlementss? >> this is something we mentioned in the book, these tactics of these settlers is to start a new neighborhood which is about a mile or two miles away and they call it instead of for instance, maler ah domim, they call it maler ah domim number two. so they're still there, the same people who started 4 2-1/2 years ago to build the settlements are still there. so they outmaneuver prime
ministers, presidents. they have their ideology, they have their interests, and they have their partners everywhere, in the israeli knesset, in the israeli government and in the israeli army, people who support them. this couldn't have happened, of course, i mean, if the palestinians have decided that they want to start new settlements, how to expand their cities. it won't take more than a few hours before the army will be there and make sure to remove the new settlers. >> rose: i got you. all right, what's happening? >> what's happening, charlie, is that nine months ago when president obama took office, he realized that he has... the first thing he has to do is to create some kind of trust, a minimum trust that is required to start negotiations. so he went to cairo to try and establish some plus between the united states and.... >> rose: with the big speech. >> with the big speeches with
the arabs and muslim countries after the eight dramatic years of the relationship between the arabs and the muslims and the united states after september 11 and the axis of evil from president bush. and then he believed that he can build trust on the... under the equation that these t israelis will stop building settlements to show good will since we are going to negotiate those... the future of those territories, it made sense to him that israel will not pre-judge the final status. at the same time, the arabs will start normalizing their relationship with israel. he convinced president abbas, abu mazen, to join him for this. and he climbed eventually on a very high tree, he took abu mazen and the palestinians with him to the tree and one day he jumped off the tree. but, you know, the president of the united states has a safety
net. he can afford to jump. now abu mazen is still stuck over there on the street because hamas will not allow him. so he took it seriously that before we start negotiating, israel will completely freeze the settlements. it turns out they said no to the president and he refused, especially on jerusalem, to make a commitment that there's not going to be any more settlements and we are not even in the stage that we agree on the terms of reference. so we are not even where we left off when prime minister olmert was negotiating the final status agreement with abu mazen and sippy livni. we are not back to square one. we are minus one or minus two. >> rose: what do you make of the goldstone report? >> i think that goldstone simply
overkilled the... i think that israel should have done its own inquiry. but what goldstone did is played right into the hands of people who want to make this point that you can't trust the international community, you can't trust the u.n., you can't even trust the american administration. because, you see, you have atrocities everywhere. you have atrocities in afghanistan, you have in iraq, in chechnya, but the only people who are accountable or are expected to be accountable are the israelis. and i think that the mistake was even be including in the terms of reference of the goldstone committee the term "war crimes." so they decided that there were war crimes. you know, i'm not an advocate, a big fan of solving problems between israelis and the palestinians by using force.
so... and i wrote articles against the war in gaza and i believe that israel should have tried to solve in the other ways. >> rose: was it solveable in other ways? >> i think so. i think it's still solveable. >> rose: how could you have solved that? >> i think that we can solve it if we really start negotiating with the.... >> rose: hamas. >> not with hamas, with fatah. >> rose: so fatah could control gaza strip even though it's run by hamas? >> yeah, if we remove the siege over gaza, if we allow the palestinians in gaza to lead... to have decent lives. and at the same time, to show that there is a difference between the west bank and gaza. that there is a difference between the good guys and the bad guys. now i think it will be a mistake
to negotiate with hamas without being able to show real progress on the financial status on ending the occupation. the hamas can't have it both ways. they can't say we want to destroy israel, we'll never recognize israel and expect israel to negotiate. but at the same time, we cannot punish 1.5 million people who live in gaza. so the way to do this was to reach some kind of conflict resolution with the fatah, with abu mazen, and to contain the situation? sdz and find a way to get from the hamas a green light to abu mazen to negotiate. but we can't hold 1.5 people hostages for such a long time. it was a pressure cooker.
it was doomed to blow up. >> rose: what do you think the prime minister wants to do? >> i think that what he wants... what he has in mind is to wait maybe one and a half or two years. there are some people over there that believe that obama is a one-term president and this is an accident, what happened to us in the american elections. they don't really believe that israel has got partners so there's nobody to negotiate a deal that they can live with. >> rose: so netanyahu doesn't believe there's anyone within the palestinian community that he can negotiate with? >> what he believes is that there is no palestinian that will be willing or able to accept his deal and i can tell you there's no palestinian that can accept his deal. >> rose: his deal? >> his deal. for instance that jerusalem is not on the table for negotiations, for instance.
there is no palestinians that can accept it. jerusalem is the most important thing for them. so what he basically wants to do is to buy time and in my view this is very irresponsible. >> rose: what does he mean as he insists on israel... i'm in favor of two-state solution as long as they recognize israel as a jewish state? >> my guess is that had he known that the palestinians would have accepted it, he would have found something else. he knew when he said this that the palestinians cannot say... you know, there are people in israel, even the zionist party ma rets and even myself who believe israel should be both a jewish state and a state of all its citizens. i want the israeli... 1.5 million people out of 7.5 million people who live in israel. i want them to feel that they are israeli citizens as well as i am.
and if i tell them israel is a jewish state, it's not your state. and i interviewed arafat just before he passed away and i asked him this question, charlie, that you just asked me. and he said "i can't alienate my brothers and sisters who live all n israel. tell them that israel is not your state." so i believe that netanyahu knows this. and he knows that abu mazen can never accept it. but on the other hand it sounds good to jewish and to israeli ears. we are saying we accept a palestinian state, you have to accept a jewish state. i'll tell you more than that. i don't need an arab to determine my nationality as well as u.s. and america, i believe. you don't need me to confirm your nationality or your identification with your country
>> rose: take a look at this, this is from dan mare dorr on a recent visit. >> i was with barack and with clinton in 2000, he offered almost everything and the answer was no. olmert offered it just a half year ago, the answer was no. so the problem may not be in one they're offering but they're accepting of some sort of compromise. i've heard it from meridor and i'm not surprised, charlie. i'm not sure there is coalition in israel that can accept today what barack offer. >> rose: at camp david? not even at... >> not camp david. >> rose: at camp david. >> actually what took place a few months after that and the clinton parameters is the ultimate proof that arafat shouldn't have taken the camp david deal because eventually he got a better deal a few months
later. so retrospectively,... but what i'm saying is that we got.... >> rose: it's too late. >> a very precious present from the arabs in 2002, which is arab league initiatives. which offers israel normalization with all arab countries, it was adopted then by the organization of the muslim countries in tehran, actually, in 2003. >> rose: yes. >> that that was in return for ending the occupation. >> rose: going back to the '67 borders give or take certain geographical areas. >> give or take. what they are saying is if we can agree with the palestinians on territorial swap, that's fine. >> rose: exactly. >> so this is, charlie, the deal. we will not get... barack made the same mistake that now meridor is making the palestinians will insist to get their 22% of the cake west the west bank in jerusalem and gaza. and this is not negotiable.
what is me gaucheable is a territorial swap on one on one. >> rose: what's your point about the arab initiative? >> the arabive inive the is part of the road map. and i think israel is making a big mistake by not negotiating on this. >> rose: so you know where the arabs are prepared to go and you should therefore be prepared to meet them? >> yup. >> rose: are's the deal? >> yup. in '67, a few days before the war, if anybody would have told me that all the arab countries are willing to accept israel in the pre-'67 lines i would say that the messiah is there. i wouldn't believe him. >> rose: so what abouts? >> well, you see, the hamas was elected actually by a minority of people who believe that the hamas has got the right way. they were elected by default
because the fatah was not able to deliver anything. once the fatah will be able to deliver, you will see maybe 15% of the people voting for the hamas. all the rest are people who voted against fatah. but they are not in favor of the ideology of the hamas. actually by failing to reach an agreement with the palestinians, we have created the hamas. the hamas didn't exist before mid-80s. and there is a zero-sum game, charlie, between the hamas and the fatah. if we want to make sure that our partners, which is fatah, added by abu mazen, will be able to deliver something to the people and get rid of hamas, or contain the hamas as... you know, a small party they will always be there, then we have to move forward. we have, i think, to grab the
opportunity that we have an american president after eight years that the united states was not willing to facilitate negotiates. we have senator mitchell coming back and forth and we have obama who insists on doing whatever he can and eventually what will happen is that the president will say well, we can't want peace more than you and i'm sure you heard it so many times from american leaders. and he has enough on his mind, he's got afghanistan, he's got iraq, and let alone domestic issues. and i'm afraid we're going to miss this opportunity. >> rose: what is the window of opportunity and how long does it last and when does a two-state solution become not feasible? >> there are some people who will tell you that it's already not feasible. >> rose: yeah. >> actually, charlie, we live in
binational reality, not in a binational state. but israel right now-- and this is a paradox-- that netanyahu insists that the palestinians will recognize israel as jewish state as a pre-condition for negotiations. if the palestinians will say "you know what? we don't want to negotiate, we give you back the keys, no more palestinian authority, no more oslo, take the keys, bring back the israeli military government, no more one billion dollars from donor countries, the american taxpayers are paying the salaries of the palestinian teachers. and you know what? we want to be loyal citizens of israel. one man; one vote." right now israel in the territories that israel controls there are about 45% of palestinians. this is not a jewish state. so actually netanyahu is giving the key to the future of the
jewish state to the palestinian. and your question... you're right on the money, because this is the question. you said where is netanyahu heading? well f you think three, five years ahead, what will happen to us. you know, i interviewed king abdullah to two weeks ago of jordan and he asked me the same question. he said "your best people are leaving the country" because people are fed up with more wars. and if israel will not be a jewish state, many people will find out that it's nicer over here in new york. and right now there is a growing camp in palestine of people like you say be who are saying enough is enough, we've tried more more than 16 years now since oslo to negotiate a two-state solution. you don't want it, like king abdullah said, there's no third
way. there's either a two-state solution or one state solution. >> rose: not two and a half. >> not two and a half and not three. >> rose: okay, so with respect to one other big issue, which is iran, what's the current thinking in your government? what does netanyahu and his foreign minister and ehud barack think are the options for israel? >> actually it seems that ehud olmert... that the americans as well as the russians and the rest of the five plus one are going to support this draft this which in the view of the israelis is a naive move, they don't trust iranians, they believe that iranians have outmaneuvered the obama administration, they're just buying more time and one day we'll wake up and find out there is another side. where they are still working on
the bomb. >> rose: what are they going to do? >> they don't have any options, charlie, because the sanctions that we were hoping... some people were hoping that would be upgraded of course will not work because the chinese and the russians will never accept this. and once they will sign this agreement, it removes from the equation the option of a military attack. israel cannot afford to attack iran without the approval of the americans, which they will not get. and they can't violate the sovereignty of jordan and especially turkey these days when we have such a big crisis by doing it on our own. and the other thing is what will happen the day after? let's assume that they attack. without the support of the americans, israel cannot afford... the iranians can afford one million casualties, they prove that they can during
the iran/iraq war. israel cannot afford one thousand casualties. you remember what happens during the 2006 war in the north against hezbollah when we were hiding in shelters for a few weeks and the whole country was paralyzed. >> rose: does israel take the united states' support for granted? >> um, you know, i'm on my way to the j street conference. >> rose: explain what j street is. >> j street is a new american-jewish lobby that supports the peace process, the two-state solution and believe that the american people should hear different voices, not only the usual suspects, aid yell, apac, and they don't believe that israel is always right. there are some people in the
united states as well as in israel who believe that the israeli government should do more. >> rose: or not only that they don't believe israel is always right, they don't believe that necessarily what israel does is in the best national and security interest of the united states. >> and of the israeli interests. >> rose: exactly,. all three. >> exactly. the message that they are trying to deliver is that it is kosher to say no to the settlements, for instance. that it's in israel's interest to stop the settlements. and if you say this, you are not necessarily going to lose your jewish constituency or the jewish money in the next elections if you are a congressman from new york. and this is a very interesting experience. i'm not sure, you know, if this will really work but it seems
that in the last elections they got to the ears of many congressmen and it seems that, you know, in the jewish grass-roots, unlike in the establishment, there are people who support this line of j street and they just... the challenge is to prove that they are not anti-israeli. >> rose: ehud barack believed when he negotiated the deal he did at camp david and even the deal that was made under different circumstances at taba, he believed that he could sell that deal to the israeli public. is that still doable? >> you know what? i think that this current government is able to send... to sell the agreement tomorrow morning if they decide to do this. they have more support than the
previous government, than olmert. you remember when olmert did this he was almost at the end of his career. >> rose: that's my point, though. what happens if netanyahu would say "look, this is... this is what i'm going to do, this is what i support, this is a real chance for israel i look at the demographics and i look at a whole lot of issues, i look at iran, we have to make a deal here." >> rose: >> and barack is on my side. >> rose: and barack is standing right next to him. to what happens to the coalition >> perhaps what will happen is that he will have to kiss good-bye to some office colleagues like benny begin from the likud and perhaps lieberman and some of his right wing... >> but somebody else will step in to give him a majority coalition? >> a dee ma. he's got the full a dee ma, most of kadima, 95% behind. they are the largest party.
and they can form a new coalition. >> rose: and she would support something like that? >> of course she would. >> in a coalition with baby as prime minister and she'd be foreign minuter? >> she could be the foreign minister. you know, i can tell you a story when president obama met with president mubarak, they had discussed this political 6-problem in israel and president obama said, you know, netanyahu has a problem with coalition, with the right wing. and president mubarak said "it's his choice. he has an alternative coalition >> rose: he has to believe... >> to believe that he wants to do it otherwise we are going to lose the... maybe even jeopardize our relationship with egypt and with jordan and if he does it, he knows that he's got
sippy livni waiting for him. >> rose: this is water under the bridge but suppose in 1967 after the war, the great israeli victory after that war, that the prime minister then had said "we don't want to be an occupier, we don't want to be on the west bank, we want to go back to where you were, we have taught you that we can beat you and we now want to make a lasting pace. we'll go back to the same territorial alliance, we want some kind of guarantee for our security in doing that. what would have been the result? >> last poll that i saw last week is that two-thirds of the israelis support the a two-state solution. now what you need to explain to them, that a two-state solution is not something that you can go and buy in the market and try to bargain. >> rose: right.
>> it's like you said, we have to go back to '67 and tell urss that perhaps, you know, after 42 years of building settlements and trying to create a new reality, we have to admit it didn't work. >> rose: and we'd be much better off if there was a viable economically sustaining palestinian state next to us? >> absolutely. >> because otherwise what we'll have is a hamas state supported by iran. this is the alternative. or we, as you mentioned before, charlie, will have to give up the whole idea of a jewish state, this will be tend of the zionist idea, vision. so... and you know, this book what actually we say is that after all the settlement movement has failed because what you have there is all together 300,000 people out of 7.5
million or six million jews or 7.5.... >> rose: who are determining the future of the others. >> exactly. so with all the temptationings, all the bonuses that they offered people, people didn't go to the occupied territories. the majority of the israelis, the mainstream israelis want to live in tel aviv. >> rose: this book is called "lords of the land" it's now in paper back. the war about israel's settlement and the occupied territories. thank you for coming. great to see you. >> it was a pleasure as always. >> rose: see you next time. captioning sponsored by rose communications